4th DCA Reverses Sanctions Against Bank

Plain English Summary:

A bank filed foreclosure against a husband and wife.  Only the wife signed the note and mortgage, but there was a page of the mortgage that mentioned that there was an addendum to the mortgage for additional borrowers.  The husband was sued for foreclosure along with the wife and wanted sanctions from the bank for having to defend the case.

The appellate court said no as the bank reasonably relied on the mortgage itself which had a reference to an additional page for “additional borrowers,,” and assuming there may be other borrowers, in an abundance of caution added the husband as a defendant to the foreclosure case.  It was not intentional bad conduct by the bank to warrant giving the husband money sanctions from the bank.

The 4th DCA recently, in Trust Mortgage, LLC vs Ferlanti, 4D 15-1437, reversed and order of sanctions against a foreclosing lender holding that the trial court erred and that the lender had an objectively reasonable belief that a non-signing spouse was a properly named defendant in the case.  Opinion here.

The lender has filed a mortgage foreclosure against against husband and wife.  The note and mortgage were both only signed by the wife, however the 1st page of the mortgage has a box checked that referenced an addendum for additional borrowers; but no addendum was present.

The non-borrowing spouse moved for summary judgment arguing that he did not sign the note and mortgage, and moved for sanctions as the lender and its attorneys jointly as they  “knew of should have known that its claim ‘was not supported by the material facts necessary to establish the claim.”

The trial court granted the non-borrower spouse’s motion for summary judgment and granted sanctions against the lender but not its attorneys.  The lender appealed.

On appeal the 4th DCA opined that “[t]o award fees under the statue, ‘the trial court must find that the action was ‘frivolous or so devoid of merit both on the facts and the law as to be completely untenable.'” … Moreover, that finding ‘must be based upon substantial competent evidence presented to the court at the hearing on attorney’s fees or otherwise before the court and in the trial court record.'”

The court stated that while the husband was named as a defendant in the complaint, there was no allegation that he signed the note or mortgage, because the lender showed “there was at least some triable set of facts under which [he] could be liable under the mortgage agreement” given the reference to an additional missing signature page, “its absence does not indicate that a theory based on its existence, with [the husband’s] signature on it, was ‘frivolous or so devoid of merit both on the facts and the law as to be completely untenable.'”

Ultimately the 4th DC found that  “lack of concrete proof of [the fact that the husband signed the mortgage] does not mean its complaint was frivolous. A party does not need to have conclusive evidence to prove its case at the time of filing in order to avoid sanctions. Instead, like here, where the party reasonably believes the factual basis for its claim exists, it is entitled to proceed with its claims and seek to prove those facts. If attempt to prove those facts are fruitless, that is still not cause for sanctions where the party’s initial belief was well-founded. It is only in circumstances  … where the party knew or should have known at the time of filing that the material facts were nonexistent that a claim is truly frivolous and worthy of sanctions.”

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